104.

Liabilities of Savings Institutions—Tax on the Average of Deposits over $500—Surplus and Reserved Earnings.

ASSESSOR'S OFFICE, 3d District of Massachusetts,

Boston Dec. 6, 1866.

SIR: A wide difference of opinion prevails among the managers of Savings Banks in regard to the exact requirements of the present law in the matter of tax. It is contended that the law requiring returns to be made on the first Monday of January and July in each year, subjects such institutions to a tax of one-twenty-fourth of one per cent. semi-annually, on the amount of deposits of $500 and upwards existing on said first Mondays of January and July, respectively; and that they are liable to no further or greater tax.

Par 71 per 40 of the present law provides that "there shall be levied collected, and paid, a tax of one-twenty-fourth of one per cent. each month, &c.," and at the close of par. 162 p. 92, it is provided that the "annual or semi-annual interest allowed or paid to depositors in Savings Banks or Savings Institutions shall not be considered a dividend.”

In regard to the first point I claim the intent of the law to be that such institutions shall on the first Monday of January or July in each year, return the aggregate amount of their monthly deposits of $500, and over, as they existed on the last day of each month preceding, and pay the tax thereon at the rate of one-twenty-fourth of one per centum ; or return the average amount of the six months preceding and pay a tax thereon of of 1 per cent.

In regard to the second case, I suppose no tax is chargeable upon dividends, as such-as the principal part of such dividends are either paid directly, or credited in account, to depositors.

There is generally a large surplus of gain, on savings of the preceding six months in excess of the dividend, which is credited to no individual account, but carried to account of reserved profits, and may not be divided for many years.

“The Provident Institution for Savings" in Boston, at the July dividend in 1866, credited "Profit and Loss" with more than $110,000 reserved profits.

Are gains in this form by such institutions taxable? and if so, at what rate? Very respectfully,

Hon. E. A. ROLLINS,

WM. S. KING, Assessor.

Commissioner of Internal Revenue.

OFFICE OF INTERNAL REVENUE,
WASHINGTON, Dec. 13, 1866.

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SIR-Your letter of 6th inst., relative to Savings Banks, is received. As regards the manner of making returns of tax on the deposits of such Institutions as are enumerated in the proviso to section 110, act

June 30, 1864, amended July 13, 1866, I refer you to Circular No. 53 of this office, issued Sept. 17, 1866. (Record Vol. IV., p. 102.)

You will see from this that the Institution is allowed to take the amount of deposits on the first days of January and July of each year, as the correct average for the six months preceding-but in case this time is not satisfactory to the Assessor, he can fix some other period between the first days of January and July, as giving an amount which can be taken as the correct average for the six months. This management was made at the solicitation of the New York Savings Banks, to facilitate making the returns, and as it gives the Assessor discretionary power to determine what day the deposits shall be taken as a fair average for the six months, it cannot give the Banks any undue advantage. Replying to your second question I have to say, that, under the proviso to section 120, act of June 30, 1864, as amended July 13, 1866, the amount of "annual or semi-annual interest allowed, or paid to the depositors in Savings Banks, or Savings Institutions" is not considered a dividend, and is, therefore exempt from the tax of five per cent. imposed by said section.

The proviso last aforesaid is construed to apply only to such Savings Institutions as are described in the proviso to section 110, act June 30, 1866, as amended, &c., viz:-"Provident Institutions, Savings Banks, Savings Funds, or Savings Institutions, having no capital stock, and doing no other business than receiving deposits to be loaned or invested for the sole benefit of the parties making such deposits without profit or compensation to the Association or Company: All others are liable to the dividend tax of five per cent.

Where this class of Savings Institutions makes an addition to its surplus fund of earnings in excess of the amount of interest paid, or allowed, to depositors, as in the case you mention, such profits are clearly subject to the tax under section 120 aforesaid.

In order to be exempt from tax the interest or earnings must be either paid to the depositors or credited to their individual account.

Very respectfully,

THOS. HARLAND, Deputy Commissioner. WM. S. KING, Esq., Assessor, 3d Dist., Boston, Mass.

105.

Savings Banks and Provident Institutions-Dividend Tax.

The undistributed earnings of Provident Institutions, Savings Banks, Savings Funds, and Savings Institutions, having no capital stock, and doing no other business than receiving deposits to be loaned, or invested for the sole benefit of the parties making such deposits, without profit or compensation to the association or company, fall within the proviso to section 120, of the act in force, (162 of Compilation) and are exempt from dividend tax. Although the entire amount of annual or semiannual interest, may not be paid to the depositors or credited upon their

several accounts at the time the dividend is declared, it will eventually be disposed of in this manner, and the depositors alone will receive the benefit of the business. (Letter of Commissioner, Jan. 7, 1867.)

DISTILLED SPIRITS.

106.

Provision of Section 68, Act 1864, amended by Act 1865, limiting time for commencing proceedings for Forfeiture of Spirits-Repealed by Act of July, 1866.

Section 68, of the act of June 30th, 1864, as amended by the act of March 3d, 1865, limiting the time for commencing proceedings to enforce a forfeiture of liquors, the vessels containing it, and the vessels used in making it to thirty days, was repealed by section 9 of the act of July 13, 1866.

107.

Spirits may remain an unlimited time in Bond, but Tax must be paid unless removed according to law.

The time during which spirits may remain in bond without payment of tax is not limited, but the tax must be paid before they are removed from the warehouse, unless removed in pursuance of law.

108.

Manufacture of Saleratus on Distillery premises.

No other article except saleratus can be manufactured upon the premises where spirits are distilled.

109.

An Assessor has no authority to remove an Inspector of Distilleries, but must report to Commissioner.

An assessor has no authority to remove an inspector and appoint another person temporarily in his place. Where an inspector is derelict in his duty, or is interested in a distillery, the case should immediately be reported to the Commissioner of Internal Revenue.

110.

Sale of Brewers' Stamps by Collectors.

Collectors are not authorized to sell stamps denoting the amount of tax upon fermented liquors to any one outside their respective districts, nor to any one within their districts except brewers.

111.

Inspection by General Inspector of Spirits withdrawn from Bonded Warehouse.

All spirits withdrawn from a bonded warehouse should be inspected by a general inspector.

112.

Countersinking and affixing of Beer Stamps.

The purpose of countersinking for beer stamps is to protect the brewer by preventing the stamp from becoming detached. If brewers prefer to affix their stamp without countersinking, there is no legal objection to the practice.

113.

Liabilities of Distillers of Spirits from Fruits, such as Cherries, Blackberries, &c.

The distillers of other fruits, such as cherries, blackberries, &c., are not entitled under the law to the benefit of the low rates of special tax imposed upon distillers of apples, peaches and grapes, nor has the Commissioner of Internal Revenue any discretionary power to exempt the distillers of such other fruits, from any of the provisions of the law relating to the manufacture of spirits.

114.

Wine and Spirits produced from Rhubarb.

Wine produced from rhubarb by fermentation is exempt from tax, but spirits produced from rhubarb by distillation are subject to a tax of two dollars per gallon. The exemption of "wine made of grapes, currants, or other fruits and rhubarb," applies to fermented liquors only.

115.

Special 48 applies to Spirits, and not Coal Oil.

The provisions of special 48, from the Internal Revenue office, are applicable to transactions in spirits only, and not to coal oil removed in bond. (Record, Vol. V., p. 20.)

116.

Destruction of Bonded Merchandise and Cancellation of Bond. Where merchandise shipped in bond is clearly proved to have been destroyed by fire or other unavoidable accident, the tax will be remitted and the bond cancelled.

117.

Per diem Compensation of Inspectors of Distilleries when under seizure or not running.

So long as an inspector has charge of spirits in a bonded warehouse, he is entitled to his regular per diem compensation, although the distillery

itself may not be in operation, but when the warehouse or the distiller's spirits therein are under seizure, they are not in the custody of the inspector, and he has no claim for a per diem compensation.

118.

Inspector of Spirits can act only in his own District and must act in person.

An inspector can lawfully act as such only within his own district; he cannot deputize another person to use his stencils.

119.

Tax-paid Spirits cannot remain in Bonded Warehouse. Spirits upon which the tax has been paid should not be allowed to remain in a bonded warehouse, but should be removed at once upon payment of the tax.

120.

Brandy distilled from Imported Wines liable to Full Tax.

Brandy produced by distilling imported wines, is subject to a tax of two dollars per gallon without any deduction of the import duties upon the wines.

121.

Wines put up as American Wines, exempt-Wines put up on pretence of being Foreign Wines, liable.

Wines put up as American wines, with no pretence whatever that they are imported wines or wines of foreign growth or manufacture, are not subject to tax under section 36 of the act of July 13, 1866; but if there be any such pretence, they are liable under said section, even though the bottle bear the name of a firm in the United States.

122.

Returns and Payment of Tax on Spirits.

That part of the act of June 30, 1864, which allowed distillers who distill or manufacture less than one hundred and fifty barrels per year, to make returns and pay taxes on the first day of each and every month, instead of the first, eleventh and twenty-first, was repealed by the act of July 13, 1866. By the last named act all distillers, except distillers of apples, peaches, and grapes, are required to make tri-monthly returns

123.

Party Improving Whiskey by Passing it through Still, Liable as a Rectifier.

A person becomes liable, not as a distiller, but as a rectifier, by reason of passing whiskey, upon which the tax has been paid, through the copper still, for the sole purpose of improving it.